The Unemployment Rate in the United States remains high (as you might have heard) and today we got the latest monthly inflation numbers from the Bureau of Labor Statistics and the news is that inflation is low. Over the past 12 months, the CPI has risen 1.8 percent and the “core” CPI that’s thought to be a better indicator for the purposes of making monetary policy has risen by just 1.6 percent. You don’t need to do graduate level coursework in monetary economics to figure out that 1.8 is less than 2.0 and that 1.6 is an even smaller number.
Generally speaking when unemployment is high and the inflation rate is below the level you consider consistent with your long-term price stability goals what you ought to be talking about is how much looser should monetary policy be. Maybe a lot looser. Or maybe you think it’s better to take a more tempered approach and ease just a little. Instead the whole conversation seems to be about when and whether to “taper” bond purchases—in other words, about the hows and whys of tighter money.